Have you considered joining the ‘sharing economy’ and renting out your house or spare room on Airbnb?
According to The Telegraph, nearly 80,000 UK homeowners are using this popular online rental marketplace to rent all or part of their home for additional income, a number which has almost doubled year on year.
Airbnb is a community website that lets you rent your property or room for a small fee. Often catering to short-term renters, hosts advertise their property, or spare room, online via the website or app, and payments go straight through Airbnb, which takes a 3% commission. The site is heavily geared towards reviews, to help users weed out both unfriendly hosts and unruly guests.
According to a recent study — a collaboration between London economist Dr Margarethe Theseira and Airbnb — the site generated £502 million in economic activity in the UK last year alone. This research also revealed that 80% of hosts rent out their primary residence to supplement their income, meaning the site is supporting nearly 12,000 jobs.
What are the potential pitfalls?
If you don’t own your property outright, then it’s possible you may run into problems with your mortgage provider, as your mortgage agreement might prevent subletting. You could also run into issues if your activity means your property should be classified as a house in multiple occupation (HMO), as well as running the risk of invalidating your home insurance.
Although Airbnb does have a guarantee in place, it’s important to consider protection, such as landlord insurance, which would help cover against potential losses incurred.
What protection does Airbnb give?
Airbnb offers a guarantee covering up to £600,000 in damages, but it stresses that this isn’t an alternative to insurance.
Last year it also introduced a ‘Host Protection Policy’, which protects a host against claims against them — effectively a form of public liability insurance. This has various limitations, and does not cover things such as: theft, pets, cash and valuables.
Despite this guarantee, Airbnb strongly recommends that you take out your own insurance.
The Airbnb website states: “The Host Guarantee is not insurance and should not be considered as a replacement or stand-in for home-owners or renters insurance. Hosts may want to consider independent insurance to cover valuable items like jewellery, artwork, or collectibles which are subject to limited protection under the Host Guarantee.”
You can read the full Airbnb policy here.
What level of cover do you need?
Landlord insurance covers a property owner from financial losses that might be associated with the act of renting the property. Policies tend to cover the building itself as well as any contents inside belonging to the landlord — useful if the property is furnished, for example. Different insurance policies tend to cover different things but usually this will include issues such as flood damage and theft, as well as public liability.
If you are reliant on income coming in from an Airbnb listing then, as part of your landlord insurance, you could purchase loss of booking income insurance for emergencies, such as a burst pipe. Some landlord insurance policies even provide alternative accommodation for the guest, in the event that something goes wrong.
Should you consider it?
If you own your property outright, then you may still risk invalidating your home insurance when you take an Airbnb guest in, as many providers consider this as using your house as an actual B&B. So, as well as landlord insurance, it might be worth considering upgrading your home insurance.
Whether your client is an Airbnb host because they want to meet more people or because they want to make a little income, it’s important that you help get them the right cover. For more information about the type of insurance that might be right for Airbnb landlords, please get in touch.
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